2025-03-04
The Federal Reserve Bank of the United States(The Fed) has been entrusted by Congress with two mandates to regulate the country’s economy. This dual mandate requires the Fed to control inflation and keep unemployment low. Since the Fed controls the Federal Funds Rate (the key interest rate it uses to influence other interest rates), it can influence when companies find it advantageous to take on debt and expand, leading to increased employment opportunities and a lower unemployment rate.
At first glance, low unemployment means more people are participating in the economy, which often drives up consumer prices, contributing to inflation. The Phillips Curve analyzes this relationship, describing it as an inverse correlation—when unemployment rises, inflation tends to decrease, and vice versa.
The Datas compose of three time series :
-Rate as a percentage of total unemployed and looking for work from the workforce,
-CPI on consumer goods
-The FED Funds Rate (FRED) (Federal Reserve Board)
The Federal Reserve reacts to conditions in the economies to provide guidance and issue policies in order to persue its dual mandate from congress.
The second is to control inflation, this does not mean stop inflation but to regulate it maintain it a expected rate usually between 1 and 2 %.
Since 2020 the urban consumer price index has increased by 80 points
From 2000- 2020 the index increased by ~ 90 points
As these conditions change the reserve makes changes to its policies and guidance.
Dovish
The bank lowers FRED rates in attempt to intice industry and lower unemployment increase consumer spending.🕊️📈
Hawkish
The bank raises FRED rate which contibrutes to lower spending, consumer pricing, and can lead to an increase in unemployment.🦅📉
Economic Data
https://data.bls.gov/toppicks?survey=bls
Federal Reserve Data
https://fred.stlouisfed.org/series/FEDFUNDS
Darwhin Gomez